3Q 2026 GE Vernova Earnings Conference Call - GE VERNOVA INC

Explicit Guidance:

• FY2026 Revenue: Raised to $46.5–$47.5 billion (previously 18% growth expectations now 19–21% organic).
• FY2026 Adjusted EBITDA Margin: Raised to 13.5–14.5% (previously 13.5–14.5% implied, now explicitly stated as the range).
• FY2026 Free Cash Flow: Anticipated at $16–$17 billion.
• FY2026 R&D and CapEx: Expects a combined increase of >30% year-over-year.
• FY2026 Corporate Costs: Expected between $450–$500 million.
• FY2026 Power Segment: Organic revenue growth raised to 19–21%; EBITDA margin range raised to 19–21%.
• FY2026 Electrification Segment: Revenue guidance remains $14.5–$15 billion; EBITDA margin expected to trend toward the higher end of the 18–20% range.
• FY2026 Wind Segment: Organic revenue expected to decline mid-single digits (upgraded from low double digits); EBITDA losses expected to be $400–$500 million.
• FY2026 Gas Power Backlog: Expected to reach at least 130 gigawatts under contract by year-end (up from 83 GW at start of year); Q4 expected to add ~13 GW.
• FY2027 Outlook: Combined gigawatts under contract and gas power equipment backlog expected to continue growing; quarterly profiles expected to resemble the strong Q3/Q4 2026 run rates.
• FY2027 Services Revenue: Each HA unit projected to generate $0.5 billion in high-margin services revenue over its first 20 years; HA fleet expected to reach at least 400 units by end of 2027.

Business-Segment Outlook:

• Power (Gas): Shipping 5 GW per quarter by Q3 2026 with better pricing; Q3 2026 orders priced >20% above Q4 2025; Full-year 2026 gas order pricing per kW expected ~50% higher than 2025; 3Q 2026 service orders grew 17%.
• Power (Services): Margins expected to expand into the 30s as the installed base grows; backlog growth expected to accelerate through 2027–2028.
• Electrification: Equipment backlog grew to $42 billion (up 60% YoY); North America equipment orders doubled YoY; Data center segment orders >$6 billion YTD ($1.4 billion in 3Q); HVDC market projected to be $130 billion by end of decade; Grid upgrade opportunity in US: 55,000 transmission substations to be rebuilt/upgraded in next decade.
• Wind: Onshore services margins expanding; Offshore progress on Dogger Bank B; US onshore market remains soft due to permitting/tariffs (Section 232); Vineyard Wind dispute settled with modest negative P&L impact.
• Trench Group (Acquisition): 2026 revenue estimated at $1.4 billion; expected to reach ~$2 billion in 2028 (closing late 2027); Revenue growth projected at mid-teens annually from 2026–2028; 2028 adjusted EBITDA margin expected at ~36%; Backlog of ~$5 billion (80 framework agreements).
• Nuclear: SMR industrialization progressing (Clinch River NRC approval; 1.2 GW Select order in Sweden); US nuclear fleet touched 65 GW; Uprates and life extensions growing.
• New Product Introductions: MVUPS (Solid-state transformer) prototype testing in Malta; 6-megawatt outdoor SST order received; Commercialization of EMS and solid-state transformers; Dry-type bushings expansion.

Market and Competitive Outlook:

• High-Voltage Market: Projected to reach $130 billion by 2030 (part of $300 billion total electrification addressable market); Growth driven by data centers, grid efficiency needs (8% loss reduction), and renewable transport.
• Customer Mix: 20% of gas power orders from data centers (80% traditional); Trench customers include utilities, grid operators, and hyperscalers.
• Pricing Environment: Strong pricing momentum in gas power (>20% in Q3 vs. Q4 2025 baseline); Electrification pricing positive but less aggressive than power; HVDC pricing stabilized at high levels.
• Supply Chain: Trench acquisition provides 11 factories globally; Vertical integration of bushings (5–8% of transformer BOM) to control critical components and lead times; US manufacturing footprint expanded with new high-voltage bushing factory in NC (765 kV).
• Capacity: Trench capex for capacity expansions to be completed prior to closing (late 2027); GE Vernova factory ramping to 5 GW quarterly run rate.

Macro / Industry Outlook:

• Electricity Super Cycle: Management views the industry as "early in the electricity investment super cycle" with accelerating global demand for infrastructure.
• Grid Upgrades: Need to transition to higher voltages to reduce energy losses and support electrification (EVs, heat pumps, manufacturing).
• Geographies: Strong growth in India (Barmer HVDC project $1.5B); North America (data centers, grid modernization); Europe (wind, nuclear); Southeast Asia and Middle East (expansion opportunities).
• Regulatory/Policy: Monitoring US Section 232 tariffs on wind; NRC approvals for SMR; India's high-voltage infrastructure buildout.
• Interest Rates/Tax: No specific commentary on rate impacts, but tax rates noted as a partial offset to FCF in Q3.
• FX: Trench financials converted at 1.12 EUR/USD; actual amounts vary with prevailing rates.

Strategic Initiatives:

• M&A (Trench Group): $9 billion acquisition price (13x 2028 EBITDA); Closing expected late 2027; 50/50 funding mix of debt and cash; Expected to close with <1.0x debt-to-EBITDA ratio post-transaction (issuing ~$4.5B debt); $50–$100 million annualized cost synergies by 2030; Revenue synergies potential via cross-selling to hyperscalers and international markets.
• M&A (Prolec): Integration performing ahead of expectations; Synergies being realized; Expected to be substantially complete before Trench closes.
• Capital Allocation: Doubled stock buyback authorization to $20 billion (completed $10B + $1.6B in Q3 + $1.3B in Oct); $10B buyback returned capital with excellent returns; Maintaining investment-grade balance sheet.
• Operational Efficiency: Investments in AI, robotics, and automation (net expense in 3Q, margin expansion expected medium-term); Lean manufacturing expansion; Exiting GE Aerospace transition services (generating ~$135M GAAP savings, $100M realized).
• Leadership Change: New CFO (Claire) and WIN Leader (Akon) starting January 2027; Ken Parks and Vik to transition through end of 2026.

Risks and Headwinds to Outlook:

• Execution/Integration: Risks associated with integrating Trench and finalizing Prolec; Capital deployment discipline required.
• Regulatory: Trench acquisition subject to regulatory approvals and standard closing conditions.
• US Wind Market: Soft onshore equipment orders due to permitting delays and Section 232 tariff uncertainty; Offshore project execution variability (one year remaining in North Sea offshore).
• Macroeconomic: FX rate fluctuations affecting USD equivalent reporting; Inflation impacts on costs.
• Order Mix: Q4 gas power pricing per kW expected to be lower than Q3 due to mix shift (fewer aero-derivatives, more 50Hz units).
• Services Fulfillment: Potential backlog of service fulfillment if parts supply chain constraints delay outages.

Management Tone on the Future:

• Confidence: High conviction in the "electricity super cycle" and long-term market growth; Humble but confident in ability to deliver shareholder returns.
• Momentum: Describes current state as "early in margin expansion acceleration" with "strong pull" from customers; Calls Q3 2026 a "jump off point" for future performance.
• Strategic Clarity: Emphasis on "vertical integration," "technical excellence," and "disciplined execution"; No intent to pause capital returns (doubling buybacks).
• Trench Specifics: Views Trench as "immediately accretive" and "strategically compelling" with strong customer loyalty; No immediate quantification of revenue synergies due to existing relationships but expects pull-through of transformer volumes.

Miscellaneous:

• Acquisition Details: Trench revenue in 2026 estimated at $1.4 billion; $5 billion combined backlog/framework agreements as of Sep 2026.
• Financial Strength: Ended Q3 with ~$17 billion cash; $5.4 billion FCF in Q3 driven by working capital benefits ($5.3B benefit).
• R&D/CapEx: $2.4 billion spent in 2026 YTD (nearly same as all of 2025).
• Acquisition Pricing: 13x 2028 EBITDA before synergies.
• Share Count: 15.6 million shares repurchased at avg price of ~$63.50 via $10B authorization.
• Divestiture: Voluntary $350M payment to transfer retiree benefits obligation (84M gain recorded).
• Q4 Expectations: Positive FCF, revenue growth, margin expansion.